There are several guides online explaining what a good pitch looks like, but there is a contextual part that may sometimes be overlooked. The stage of development of your idea/startup and the tone by which your investor audience receives the message would suggest subtle but important tweaks to your pitch. These tweaks and nuances are perhaps difficult to gauge at first, so hopefully these pieces of advice will help you.
By the way, this article focuses on five-minute pitches, for several reasons:
- It makes your pitch tighter
- Investors will stop and interrupt you and break your flow should you go on too long
- It leaves more time for questions, so that the pitch is like the starter, the questions is the main course and the dessert is next steps to closing
Open with what we call a ‘grab’ – a short, one- or two-line description of what you’re all about. Surprise and excite the audience. Quantify a big important area. Make it impactful.
Your audience of investors knows that the US healthcare market is worth trillions of dollars. But, what they may not know is that $22 billion of that is wasted by poor discharge conditions for patients (or whatever your case is).
Problem/Solution: What is the problem? What is your solution? Keep it obvious. You don’t need to, nor can you, educate the audience in everything. That comes across as pleading. Explain it to us in a short, simple format.
The Grab, and Problem/Solution discussion should be relatively high level and identifiable. Use easy language, focus on the customer. That’s it, job done, all in less than two minutes.
Setting this up early and quickly is key. Investors now want to understand the product-market scale stages, for growth and investibility.
Next up is what we call ‘Traction’. Prove, highlighting your progress to date, why you have a sellable solution to the problem. Prove it. Discuss customers, users, subscribers, clients etc. They know more about the problem and solution than the investor ever will. If they have already said ‘yes, we like what you are providing and will pay for it’, then the investors will take notice. What your traction looks like is critical:
- Consumers saying they ‘would love it’: meh.
- Large corporate business talking to you: meh
- Pilot signed and ready to start: maybe
- Pilot complete, results in and rolling it out to wider group: good
- Getting paid for it: best of all
Now what is in front of you is an investor who is itching to jump in with questions. How did you sell? Why did you price it at X? What next? Where is the audience? etc
Investors see hundreds of pitches a year – you have now brought them to the boil in a few minutes. Bring it home.
At this point, the investor knows what they need to know about problem and solution. Don’t be in love with your product or its features (they will change anyway), focus on the quantifiable benefits to your customers, then the investor knows it is time to move on and understand the business model and scalability.
#Toptip: Your company’s value proposition often revolves around saving time, reducing risk or saving money. Very little else matters.
Make your pitch strong and consistent throughout – hire a designer if you need too
Market size: This is key to the investor. There are various ways to look at this: Total addressable market; Serviceable addressable market; Serviceable obtainable market. We will explain these another time but, what is important here is to be specific. A Gartner report will not suffice. Investors need to know, in terms of money, how many customers are targeted.
#TopTip: The serviceable obtainable market is a good strong target of revenue to achieve in five years, with a specific number of customers.
Route to Market: Scalability is key here – how you can manage it and start to drive it? If you can use data, or other sources of evidence, all the better. Here you should show why your route to market is better than anyone elses. Your unique value proposition highlights how you compare to your competition.
It’s key at this point to understand how investors work. Let’s take venture capitalists (VCs), for example. If a VC has a €100 million fund, they need to return €300 million to their investors over time. If only two of their portfolio actually drive this, they need each of these to return €150 million. They could own 25 per cent of your company, so if you are one of their big wins, you need to be able to sell for €600 million. In order for you to be worth €600 million, at the time of sale, you need to have somewhere in the region of €200 million in sales. At what point can you possibly have €200 million in sales? And is your market instantly, recognisably able to offer that volume of sales? These elements come into VCs decision making.
‘And my revenue is spinning on a flywheel (engine), not a hamster wheel (margin issues)’
Your revenue model is not just the price you charge, it’s how your customers give you money because of the benefits obtained, partnerships who refer you etc. The variances in this area can be hugely significant to investors. Making money is one thing, how you make your money is entirely different. For example, we have looked at the difficulty behind ‘marketplace’ businesses before.
Who are you? Investors want to know as much as they can about you, about your other founders, your team. What expertise do you have in the space in which this startup operates? Who knows about selling into new markets? What, if any, is your track record in startups before?
Investor: “Alright already, I’m in. How much do you need?”
Think about that question carefully. What constitutes a good deal for you? ‘Want’ and ‘need’ enjoy completely different meanings. You want X to go global today, but you need Y to help get you to the next stage, the next market, the next product etc.
What outcomes/goals are you going to get to with an investor’s money? How will a particular figure help you progress? Remember, the investor knows you are going to need more investment at some stage, so their maths is about how much you need to achieve the next few goals. When this is achieved, it makes you far more attractive to subsequent investors, who can put even more money into the business and help it soar. Ultimately, investors eventually want you sustainable, profitable, achieving high growth and then returning their investment x100 through some later mechanism.
Now, wrap-up of the whole thread of your pitch. If you have a customer or client quote regarding why you are an important player in your market, or why your product or service has such significant potential, then wrapping it up via someone else’s words can prove effective.
Though last on this list, step 10 comes into effect from the very start: Visuals. Make your pitch strong and consistent throughout – hire a designer if you need too. This isn’t expensive, but a small amount of money can return a big improvement on your PowerPoint skills.
Use an appendix for detailed market sizing, financials, client quotes, sales process, use of funds etc. You will need a number of pitch decks eventually: short ones, more detailed ones etc, depending on the audience. And, lastly, an accompanying ‘one-pager’ document with your pitch and story concisely told.